The risk benefits of expanding its portfolio have been made all too apparent in the past year, with Eurodon facing a series of outbreaks of avian influenza, which have helped saddle it with financial losses of RUB2.6bn (US$44m). Its lamb production development plans have been confirmed by Eurodon’s CEO and general director Vadim Vaneev, who told GlobalMeatNews that large-scale production units would be established in the Rostov-on-Don region (in southern Russia) and the Tver region, north of Moscow.
The capacity of each plant would be about 15,000 tonnes of lamb in slaughter-weight per year.
Meanwhile, Eurodon is also planning to create an in-house lamb supply chain, investing in a mixed fodder production unit, and buying breeding flocks whose livestock are earmarked for the plant.
Cheap labour attraction
Vaneev said: “RUB20bn is a big figure, however, these funds will be invested in the establishment of a large-scale industry in Russia. These projects will be implemented from scratch, which involves active building of new infrastructure. We have 20 million Muslims in this country, so expect high demand in the domestic market. In addition, the profitability of lamb production is significantly higher than that for turkey.”
The Tver region appeals to Vaneev because it has abundant local cheap labour, local buyers can source relatively low-priced grain and the company has good relations with regional authorities.
This was reflected in recent statements from Tver region governor Igor Rudenia, who said his officials would provide Eurodon with all the support it needed to build the plant, including helping with constructing energy and transport infrastructure for the plant.
Russian Ministry of Agriculture officials said it would be difficult to assess the feasibility of these projects, given the company’s financial problems. Speaking to GlobalMeatNews, an official said these new lamb units could generate significant profits for the company in the medium term, but that Vaneev needed to solve the company’s debt problems first.
Ministry analysts added that Eurodon was already planning to saddle itself with more debt through planning to invest RUB5bn (US$84.3m) into building a duck meat plant, also in the Rostov-on-Don region, for which it has taken out a substantial loan. That said, these analysts noted that Vaneev was an effective lobbyist within financial circles, which might allow him to source a syndicated loan of RUB20bn for the lamb project.